The Life, Times, and Ideas of Adam Smith

1. The Life, Times, and Ideas ofAdam Smith Paul C.Sutton psutton@du.edu Department of Geography University of Denver

2. Interesting Background Info Adam Smith, born in rural Scotland in 1723, was kidnapped by gypsies at the age of four but returned to his family. A student at Oxford, he was Professor of Moral Philosophy at the University of Glasgow at twenty-eight and established himself as a central figure in European intellectual life in 1759 with the publication of The Theory of Moral Sentiments. This led to the opportunity to tour France as the private tutor of a young member of the nobility and allowed him to meet the leading French economist of the day, François Quesnay, whose tableau économque, an anticipation of modern input-output tables, depicted the interdependent nature of the flow of goods and services throughout the economy. -Stephen Martin 1998

3. The birth of Adam Smith (1723) On the Firth of Forth just across and to the north of Edinburgh, in County Fife, will be found a town, Kirkcaldy; it is here, in the year 1723, Adam Smith was born. Adam Smith was to become the first political economist the world had ever known. He was to take his place at the head of the first school of economics, one that continues and is knownas the "classical school."

4. England, Wales, & Scotland in the mid-1700’s: The Industrial Revolution ?

5. Surprisingly, Adam Smith was never a professor of ‘Economics’ or ‘Political Economy’ In 1751, at age twenty-eight, Adam Smith became a professor of Logic at Glasgow, and then, the following year, took the Chair of Moral Philosophy. In 1759, he published his Theory of Moral Sentiments, a work that spread to both Germany and France, a work that he kept revising right up to his death in 1790.

6. Adam Smith hung out with some very famous people Smith discussed matters with his friend David Hume (wrote ‘An enquiry into human understanding’; and went to London, there to discuss his ideas with the literati of the day, one of whom was Samuel Johnson (famous literati of 18th century England) . He met the great American, Benjamin Franklin (1706-90). Franklin must have made quite an impression on Smith; it is said that The Wealth of Nations was put together, specifically with the American colonies in mind. David Hume Samuel Johnson

7. Adam Smith spent a good deal of time in France (1764-1766 just after the 7 years war) France had a special attraction for Scottish people, for it was to France they had turned during the course of the wars with those to the south of them, the hated English. In the 1760s Smith traveled to France, met some of the "physocrats." (Quesnay among them) \ It was in France that he met Voltaire; there too, Adam Smith started to write his masterpiece, An Inquiry into the Nature and Causes of the Wealth of Nations, a work that was published in 1776.

8. Adam Smith & “Free Trade” in France On travelling to Paris with his charge, a young Duke from an influential English family which had chosen him as a tutor, Smith met, among others, Quesnay and the French Ministers, Anne Robert Jacques Turgot (1727-81) and Jacques Necker (1732-1804). In Geneva, Adam Smith met Voltaire. Overall Smith was of the view that the French physiocrats had the best answer up to his time: "[The Physiocratic system] with all its imperfections is, perhaps, the nearest approximation to the truth that has yet been published upon the subject of political economy." "They [the French Économistes] delighted in proving that the whole structure of the French laws upon industry was utterly wrong; that the prohibitions ought not to be imposed on the import of foreign manufacturers; that bounties ought not to be given to native ones; that the exportation of corn ought to be free; that the whole country ought to be a fiscal unit; that there should be no duty between any province; and so on in other cases. No one could state the abstract doctrines on which they rested everything more clearly. "Acheter, c'est vendre,' said Quesnay, the founder of the school, 'vendre, c'est acheter.' You cannot better express the doctrine of modern political economy that 'trade is barter.' 'Do not attempt,' Quesnay continues, 'to fix the price of your products, goods, or services; they will escape your rules. Competition alone can regulate prices with equity; it alone restricts them to a moderation which varies little; it alone attracts with certainty provisions where they are wanted or labour where it is required.' 'That which we call dearness is the only remedy of dearness: dearness causes plenty.'"

9. Quit the University and Spend some time in Paris (oh that we could do this now ) It was in France that Adam Smith observed the results of "both the restraints upon the interior commerce of the country and the number of the revenue officers ..." The situation which Smith observed in France was one that was essentially brought on by taxation, a system that made the people "exceedingly miserable," a system, which, in years to come, would bring on the bloody French Revolution; and, to bring, in its wake, Napoleon.Thus, Adam Smith, steeped in history and philosophy, is exposed to both the English and French political-economic systems of the day: "And side by side with this museum of economical errors there was a most vigorous political economy which exposed them." Though it has been shown that he was a most curious human being, Adam Smith displayed, in the writing of The Wealth of Nations, a "profound knowledge of the real occupations of mankind." How did he come across this knowledge? Undoubtedly it was because -- to the good fortune of the rest of us -- he left the environment of the university in 1764 to become the tutor to the young Duke of Buccleuch, which resulted in a leisurely tour of France during the years 1764-1766. England and France had just finished their Seven Years War with one another, so unmolested travel was presumably possible: and so to Paris he and his charge went.

10. Praise for the Wealth of Nations “If one is interested in the study of economics -- and one should certainly be if they are at all interested in governmental policy, then one should begin with a good dictionary and a copy of Adam Smith's Wealth of Nations. This is likely all that one needs to do; and this is indeed fortunate. For, to go beyond Adam Smith, it is to go beyond into the writings of the thousands of economists that have written since; and, thus, to go into a thicket full of obscure, and for the most part, meaningless terms.” You will probably come to appreciate this quote (and The Wealth of Nations) by the end of this class 

11. The Wealth of Nationsloaded with empirical observations of real economic activity The Wealth of Nations, "the principia of politick operations," opens with a description of the specialization of labour in the manufacture of pins; the book covers a variety of subjects: from the professorships at Oxford to the statistics on the herring catch since 1771; from stamp duties to the coined money used by the Romans. The book is full of detail. It was not to be just a book on economics, such as, say, Ricardo was to write some 41 years later, in 1817, Principles of Political Economy & Taxation.

12. Smith's book was considered to be revolutionary, as it did NOT deal with the class structure of the age, and the eternal questions of who had what and why? "... it is not his aim to espouse the interests of any class. He is concerned with promoting the wealth of the entire nation. And wealth, to Adam Smith, consists of the goods which all the people of society consume; note all - this is a democratic, and hence radical, philosophy of wealth. Gone is the notion of gold, treasures, kingly hoards; gone the prerogatives of merchants or farmers or working guilds. We are in the modern world where the flow of goods and services consumed by everyone constitutes the ultimate aim and end of economic life." What does it mean to ‘ignore distributional effects’?

13. Key Idea #1: People acting in their own individual self interest maximize society’s overall good "Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society. Do you believe it?

14. Key Idea #2: The Invisible Hand "He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

15. Adam Smith as father of today’s fundamental conservative ideas What Adam Smith did in his book was to explain how self-interest was the engine of the economy and competition its governor. He set forth the great lesson that all economists come to sooner or later. I quote Professor Heilbroner: "First, he [Adam Smith] has explained how prices are kept from ranging arbitrarily away from the actual cost of producing a good. Second, he has explained how society can induce its producers of commodities to provide it with what it wants. Third, he has pointed out why high prices are a self-curing disease, for they cause production in those lines to increase. And finally, he has accounted for a basic similarity of incomes at each level of the great producing strata of the nation. In a word, he has found in the mechanism of the market a self-regulating system which provides for society's orderly provision."

16. Adam Smith Quote #1 Government:- "All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man or order of men. The sovereign [politician] is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient: the duty of superintending the industry of private people." (The Wealth of Nations, vol. II, bk. IV, ch. 9.) To sum this up……..Government interference is bad.

17. Adam Smith Quote #2 • Monopoly: • "A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate." • "People of the same trade seldom meet together, even for • merriment and diversion, but the conversation ends in a • conspiracy against the public, or in some contrivance to • raise prices. It is impossible indeed to prevent such • meetings by any law which either could be executed, • or would be consistent with liberty and justice.“ • We did decide to create a Securities & Exchange Commission (SEC)

18. Adam Smith Quote #3 • Politicians: "It is the highest impertinence and presumption, therefore, in kings and ministers [read politicians] to pretend to watch over the economy of private people, and to restrain their expense. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs.“ This is much of modern conservatism in a nutshell

19. Bibliography(material from these sources used) http://www.blupete.com/Literature/Biographies/Philosophy/Smith.htm#Intro